Should You Move to Cash Before the Election?

One of the most common questions I've received over the past month is: 

"Should I move to cash until after the election?" 

 Directly following that question comes a familiar comment: 

 "I'm worried if [insert either ‘Trump’ or ‘Biden’] gets elected then the economy will tank." 

This is not a new concern. I heard the same questions and comments back in 2016. I think it's very natural for investors to tie the movement of the stock market directly to their top choice for the Presidency. Republicans anticipated stock market devastation through the Obama Administration, and Democrats expected the same thing when Trump was elected 8 years later in 2016. And while both administrations have seen economic turmoil, the stock market was higher at the end of their term than at the beginning of their term. 

All that is to say, if we look at nearly a century of returns, we see that the stock market trends upward, regardless of who is in the Oval Office. That is not to say that the President does not impact the economy, but as we've seen this year, the stock market is not always an accurate reflection of economic health (check out the video we did here if you want to learn more about this concept). 

We must remember…

 “Shareholders are investing in companies, not a political party. And companies focus on serving their customers and growing their businesses, regardless of who is in the White House." (1)

While the White House does play an important role in economic policy, the collection of millions of investors that ultimately determine the price of a stock, factor in much more than just the Presidential Administration. There are thousands of factors that determine market prices, including interest rate changes, commodity prices, technological innovations, global pandemics, foreign relations, and much more. 

“Stay the Course”

My message is the same as it's always been: Stay the course.

The stock market rewards investors who are disciplined and patient, regardless of whether the President is a Republican or Democrat. While it can be difficult to be rational and resolute in a time that feels anything but that, I urge you to take a long-term approach to how you think about investing. If your portfolio appropriately reflects your need, ability, and willingness to take risk, then you can sleep soundly knowing that, in time, you will be rewarded for your discipline. 

(1) Dimensional: What History Tells Us About U.S. Presidential Elections and the Market